Is the StartUp Visa Dead?

President Obama seems to understand the role that startups play and the contribution that skilled immigrants make to U.S. economic growth. He has talked a lot about the importance of science and engineering, and expressed fears that, unless we improve our game, China and India will out-innovate us. He even visited Silicon Valley recently to talk to its elite. And he has had his Chief Technology Officer, Aneesh Chopra, make several trips here to the Valley.

I commend the President for putting a spotlight on entrepreneurship with his Startup America initiative; but I can’t help wondering whether this is just a giant press release. It needs more substance: a way for foreign-born entrepreneurs to start companies here and a leveling of the playing field for entrepreneurs wanting to solve government problems. (The idea of a startup visa, a visa for entrepreneurs, is one such approach. Bills supporting this idea have been doing the rounds of Capitol Hill.)

I debated this with Aneesh Chopra at the Economist Innovation Summit in Berkeley earlier this year.

The day before the event, Chopra had invited me to a meeting with the director of the U.S. Citizenship and Immigration Services, Alejandro Mayorkas, at Stanford Law School. We had had a very productive discussion with leading academics, lawyers, and entrepreneurs about how the government can interpret existing laws in a more favorable way for immigrant entrepreneurs. I was pleasantly surprised at how open Mayorkas was to criticism and at how he listened to the ideas presented to him. Both he and Chopra acknowledged the deficiencies of the current system and pledged to do all they could to have them fixed.

But Chopra dropped a bombshell at the Economist event. He said that the President would only support the Startup Visa in the context of “comprehensive immigration reform.” What this means is that the legislation will be lumped in with toxic debates about illegal immigration and will be held hostage to other interests.

There is reason to be concerned about the plight of the 12 million unskilled workers who are in the United States and lack documentation. But there is a lot of anger and other emotion in these debates. Opponents of comprehensive immigration reform say that it will provide “amnesty” to people who broke the law. Supporters argue that there are humanitarian concerns, and that we need these hard-working people to do jobs that Americans don’t want. Regardless of what is right or wrong, there is almost no chance that this contentious issue will be resolved until after the next elections—which means that the Startup Visa could be DOA.

Indeed, I received confirmation from a staffer in the office of Senator Lugar (one of the two sponsors of the Startup Visa Act) that without the support of the White House, the legislation has almost no chance of passage. The senator believes very strongly that the Startup Visa will help keep the best and brightest entrepreneurs in America and create jobs for all Americans. He says that “the United States should not wait another day, and certainly not until after November 2012, to improve our global competitiveness”. And he warns, “If the White House delays, our economy and job creation in America are likely to pay the price.”

Senator Lugar is right. Our economy will pay the price. The poor, unfortunate, unskilled workers will still be here five years from now, because they have nowhere else to go. But the highly skilled, highly educated entrepreneurs, doctors, engineers, scientists, and researchers who are trapped in “immigration limbo” will be long gone. They are in high demand and have many options.

If the President is indeed serious about addressing the needs of Silicon Valley, he should endorse the Startup Visa legislation. Most Americans will readily support a bill that ties visas to job creation. We can then focus on building consensus for comprehensive immigration reform.

In my debate with Chopra, I also criticized the Startup America initiative for providing what Forbes’s Maureen Farrell called a “Venture Capital bailout” rather than fixing the government procurement system to level the playing field for entrepreneurs.

I have written about California’s ageing legacy systems, which cost billions to maintain and can be replaced by newer web-based technologies for a tiny fraction of their maintenance costs. The problem is even bigger at the national level. We waste tens of billions of dollars on federal systems. The governments’ procurement systems favor the big contractors—who charge as much a hundred times more to build and maintain computer systems and infrastructure than Silicon Valley’s entrepreneurs would. Why not level the playing field and allow our innovative startups to bid on these? This will save taxpayers billions of dollars. Such a program will spur entrepreneurship as nothing else will. That’s a real Startup America.

To Chopra’s credit, he responded very well to criticism from Babson professor Daniel Isenberg and me. Even The Economist‘s “fireball” moderator, Vijay Vaitheeswaran, was no match for him.

I also challenged Chopra on the Administration’s obsession with “clusters.” These well-intentioned efforts to build Silicon Valley–style technology hubs are all based on the same flawed assumptions: that government planners can pick industries they want to develop and, by erecting buildings and providing money to entrepreneurs and university researchers, make innovation happen. There is not one example of a government-sponsored tech cluster—anywhere in the world—that has worked. Yet our leaders talks about clusters as if they are the secret sauce for entrepreneurship.

Our economy is stuttering and stalling, and our competitors are rising. So our debating skills are not what matter here. What matters is how soon we fix our policies and what we do to boost entrepreneurship in this country.

This article first appeared in techcrunch.com.

Vivek Wadhwa is an entrepreneur turned academic. You can follow him on Twitter at @vwadhwa and find his research at www.wadhwa.com.